Coyotes: The Pastor Bid

Yesterday was another big news day for Coyotes fans, although once again it had nothing to do with actual hockey. Rest assured there are more big days and more surprises coming over the next few weeks. Probably big surprises. Hopefully POSITIVE ones, of course.

The news yesterday was Darin Pastor’s group submitted their finalized bid for the Coyotes to the National Hockey League. With the new age news cycle velocity, it quickly spread through the blogosphere with copypasters jumping on the story.

I guess that now includes me. Sort of.

I’ll be using an article I found on the web, making minimal attribution to same while introducing educated guesswork of my own.

Leakproof Seal

If principals are being cagey and stingy with the facts, consider the reasoning. First, the NHL is likely to have imposed fairly stringent privacy constraints on all groups hoping to end up owning the Phoenix Coyotes. After four years of strife and sieves all over the place, the NHL crew is clamping down this time around. It’s frustrating to fans AND team staff AND players AND government people because it opens yet another door for agenda-based misinterpretation and speculation.

It is a BUSINESS transaction in the half BILLION dollar range, so there’s lots at stake and running the whole negotiation in public doesn’t work.

Little is served by showing one’s business hand too soon, especially if there is a pool of savvy competitors.

That said, and despite the best intentions of all concerned, even internally to the NHL you’d have to assume the Board Of Governors is at least tangentially familiar with the terms being bounced around the NHL offices. That’s 30 guys, plus two alternates for each bringing us to at least 90+ people expected to keep quiet. My assumption is that at least SOME information through that grapevine (and others) is being fed to every group involved in the bidding process.

Yesterday the Pastor group released enough positive information to pique the interest of people watching this transaction. I liked what I heard, most people I spoke with agree.

Cynics (and that includes many Coyotes fans burned over the years) will say it was a timed counterattack on the position of the Renaissance group and their consistent characterization as the “frontrunners” in the race for the Coyotes. Given the Twitter chirpfest over the past week or so, there’s plenty of ammunition to support that argument.

The other argument is that Pastor wanted to be sure all his ducks and money and Glendale based plans were in a row before re-emerging into the public eye after his initial foray with a public “I’m in” announcement tour. Since the Beacon RFP specifically states no contact with city people should be initiated by bidders, it’s entirely possible the Pastor group is following the rules specified by Glendale.

Purchase Price

According to an article I found on the web, the Pastor bid is “believed to include the highest purchase price currently offered for the team, though exact figures were unknown.” (I put quotation marks around the pasted text, that’s attribution enough, isn’t it?)

There has been plenty of buzz about the $170M price the NHL is asking for the Coyotes. Bill Daly affirmed some time ago to some Canadian broadcasters the asking price was $150M or above. So, you’d expect other group(s) that have already submitted a formal bid to be annoyed at the above statement. If a Non-Disclosure Agreement (NDA) was signed with the NHL, why would the Pastor group (or anyone else) believe their bid was the highest if they weren’t informed of the price bid by the other group(s)?

One answer to that objection is, obviously, if the price being asked is “x”, offering “x + y” could logically be “believed to be the highest purchase price” right?

Arena Purchase Agreement

According to an article I found on the web, the Pastor bid “…includes an option to purchase Jobing.com Arena over a period of time.” (I changed the order of source article bullet points, BOOM)

An arena purchase option had been a part of the Jamison bid, but if I’m not mistaken it was simply an option with a fair market value basis that was exercisable at the discretion of the buyer. My impression of this part of the Pastor bid is that it is more definitively constructed with terms laid out and executed at a specific time.

My guess would be after five years, the City would transfer title of the arena to the owners of the Coyotes, having fixed the roof and completed the necessary capital expenditures already identified in the RFP documentation. Whether there would be some equity already built prior to the five years that would be applied to the price of the arena, or if the City would “hold the mortgage” is anyone’s guess.

Lesser Glendale Commitment

According to an article I found on the web,  Pastor’s group will require “…less annual commitment from the City of Glendale to manage Jobing.com Arena than numerous studies suggest the city must pay.”

Okay, everybody following this story can do some simple math here and get within several million of the proposed commitment from Glendale. If you can’t, you haven’t been paying attention because the clues are everywhere.

The $6M arena management number has recently been resurrected and bolstered by the local paper. Council Member Manny Martinez has chimed in with support for that number as well. Let’s be clear, people, a real smart guy that knows this sports business characterized that number in a fashion that is reminiscent of the “Tricky Clams” quote from our friend Ken Jones:

“You couldn’t run a circus tent for that amount.”

So, let’s assume $6M is out and the average $15M from the prior deal is out. The number IS between $15M and $6M for sure. But, we can get closer.

Some time ago, CM Gary Sherwood floated a $12M amount as one the city could live with. The new mayor Weiers floated a few numbers, including zero, but the one that makes a little sense was his $10M number he stated during the final home game of this season.

Let’s settle on between $8M and $12M as the amount presented as the initial annual Glendale commitment to the Pastor group in the papers filed with the NHL. If you split the difference between the two, my guess is you’d hit it on the nose.

The Dreaded “Out Clause”

According to an article I found on the web,  Pastor’s bid “…includes an out clause after five years, which likely is similar to any other group’s bid.”

The “out clause” has been an issue for four years now, it was a major part of the initial Reinsdorf bid and a PR nightmare.

The prior agreement between the NHL and Jerry Moyes stated he could not relocate the Coyotes before seven years (thanks to Larry Feiner for finding this document), so many of us assumed that was standard NHL language. The fact of the matter is, whether an “out clause” is five or seven years, it probably exists in the agreement for every team and is a standard business practice.

Given the unmitigated disaster the Coyotes had been PRIOR to the bankruptcy coupled with four years of lackadaisical ownership by the NHL, the Coyotes should be characterized as a severely distressed property.

With that in mind, is five years of even exemplary ownership going to be enough to turn the franchise around? Nobody yet knows, although there are many positive signs and all measurable trends are “up”.

Would it be possible for a group to factor in five years of losses in a predisposed (and maybe prenegotiated) relocation plan? “I’m willing and have the money to lose $10M a year for five years because I’ll make serious bank selling to Canadians willing to overpay for ANYTHING (see ‘Maple Leafs’)” Sure, that’s possible.

We’re at the mercy of “intent” here. Make your decision as to what YOU think a five year “out” clause means.

My opinion is that it probably means different things to different groups looking to buy the Coyotes.

So What Now?

We wait some more. As the clock ticks ever closer to everybody’s July 1 deadline, you have a right to be nervous.

An argument can be made the work going on behind the scenes is continuing as per usual, It’s also clear political machinations are heating up in Glendale with a vengeance. Windows of opportunity need to be used and the NHL needs to either execute their “Plan B” or make a definitive move here shortly.

If the NHL is planning a “take it or leave it” visit to Glendale City Hall, they are likely to be asked to make their next stop the arena to pack their bags immediately. In the unlikely event their “take it or leave” it deal was palatable to the City, of course all bets are off and we’re good to go for at least the next five years.

Next week could be interesting.

(actual story material obviously from Craig Morgan’s piece on foxsportsarizona.com)